Health Maintenance Organizations (HMOs) have been widely discussed as an alternative to the fee-for-service third-party reimbursement system. The debate over the alternatives is unresolved because observed differences may be due to either institutional differences in incentives for patients and providers or self-selection of insurance plan. In this proposed research, we will focus on the mental health services aspect of this debate. With time-series data from a randomized controlled trial in health insurance, the Rand Health Insurance Study, we have a unique opportunity to distinguish the effects of incentives and selection. Using multivariate regression models that control for insurance plan, age, sex, income, physical health status, and particularly mental health status, we propose to examine the differences in the use of ambulatory mental health services between HMOs and fee-for-service plans. In particular, we will determine how much of the observed difference is due to incentives for providers and patients in alternative delivery systems and to self-selection into (out of) an HMO. We will examine differences in the mix of providers (e.g., psychologists and psychiatrists vs. internists and general practitioners) visited, mental health treatments received, and mental health diagnoses assigned. A particular advantage of this study is its prospective data collection; explanatory variables are measured prior to the use of mental health services and therefore not confounded with use. The staff for the project includes economists, an internist, a psychiatrist, and a statistician.